The Optimization and Evaluation of Investment Portfolio

Abstract

Investment to assets is getting more and more importance today. Shares of stock options have become one of the region’s economic indicators illustrating current economic situation. The main subject in researches of investment portfolios forecasting became a discussion about what values are best to measure portfolio risk and expected returns. Also there is a wide range of researches on macroeconomic and social events influence on evolution of stock returns. The main problem of today’s professional investment is to achieve the master level of complex investment decision adoption, included macroeconomic and historical data return analysis. The main aim of this work is to overview the portfolio optimization and evaluation models and to apply them to form the different portfolios of securities on the Vilnius Stock Market and compare them in the factor of conservativeness. There are used mean-risk models, such as Markowitz classic model, Mean Absolute Deviation model and MiniMax model, to optimize the investment portfolio in this research. Also there is performed the approbation of the multifactor model to evaluate the formed portfolios and to see the influence of the macroeconomic indexes to stock returns. Studies of this research showed 8 indicators, which have strongest linear dependence on shares return: VILIBOR interbank interest rate, consumer prices index, producer price index, construction expenses price index, trade balance, foreign direct investments, gross domestic product and inflation. Multifactorial analysis results showed that approved model to shares return data is not statistically reliable. Also, after further analysis there were found that Markowitz and Mean Absolute Deviation models create more conservative and optimal portfolio compared to MiniMax model, which is more suitable for aggressive and speculative investor.

DOI: http://dx.doi.org/10.5755/j01.ee.24.4.5416